In re: Michael G. Seifert and Robin J. Seifert

FILED
APR 03 2012
1 SUSAN M SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
2
UNITED STATES BANKRUPTCY APPELLATE PANEL
3
OF THE NINTH CIRCUIT
4
5 In re: ) BAP No. CC-11-1514-MkHKi
)
6 MICHAEL G. SEIFERT and ) Bk. No. LA 10-25453-RN
ROBIN J. SEIFERT, )
7 ) Adv. No. LA 10-02359-RN
Debtors. )
8 ______________________________)
)
9 MATTHEW TYE, )
)
10 Appellant, )
)
11 v. ) MEMORANDUM*
)
12 MICHAEL G. SEIFERT; )
ROBIN J. SEIFERT, )
13 )
Appellees. )
14 ______________________________)
15 Argued and Submitted on February 24, 2012
at Pasadena, California
16
Filed - April 3, 2012
17
Appeal from the United States Bankruptcy Court
18 for the Central District of California
19 Honorable Richard M. Neiter, Bankruptcy Judge, Presiding
20
Appearances: Appellant Matthew Tye, in propria persona, argued
21 on his own behalf; RoseAnn Frazee of the Frazee
Law Group argued on behalf of Appellees Michael
22 and Robin Seifert.
23
Before: MARKELL, HOLLOWELL and KIRSCHER, Bankruptcy Judges.
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.
1 INTRODUCTION
2 Debtors Michael and Robin Seifert (the “Seiferts”) sought
3 and obtained from the bankruptcy court an order approving their
4 settlement with Matthew Tye (“Tye”). Tye moved to vacate the
5 settlement order, but the bankruptcy court denied Tye’s motion.
6 Tye appealed. We VACATE and REMAND.
7 FACTS
8 In 2008, Tye, a licensed California attorney, represented
9 the Seiferts. The Seiferts’ mortgage lender had commenced
10 foreclosure proceedings against their home in La Canada
11 Flintridge, California; Tye defended the Seiferts in the
12 foreclosure proceedings. Tye allegedly preformed over 160 hours
13 of services for the Seiferts and sought payment of roughly
14 $60,000 in attorneys fees, but the Seiferts never paid him.
15 Representing himself, Tye sued the Seiferts in Orange County
16 Superior Court (OCSC Case No. 30-2008-00115073) for fraud, breach
17 of contract and quantum meruit. In relevant part, Tye alleged
18 that the Seiferts lied to him about, among other things, the
19 value of their home, their ability to pay their mortgage, their
20 ability to pay his fees, and their intent to pay his fees.
21 On April 21, 2010, the Seiferts filed a chapter 71
22 bankruptcy case, and John Menchaca was appointed to serve as the
23 chapter 7 trustee (“Trustee”). The Seiferts listed Tye in their
24 bankruptcy schedules as an unsecured creditor holding a disputed
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 all "Rule" references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All "Civil Rule" references are to
28 the Federal Rules of Civil Procedure.
2
1 claim in the amount of $58,240.00.
2 On July 26, 2010, Tye commenced an adversary proceeding
3 against the Seiferts objecting to their discharge, and seeking to
4 have the fees they allegedly owed him declared nondischargeable
5 (“Complaint”).2 Whereas his nondischargeability claims (“§ 523
6 Claims”) were based on the same allegations as included in his
7 state court complaint, Tye’s claim objecting to the Seiferts’
8 discharge (“§ 727 Claim”) was primarily based on his allegation
9 that the Seiferts were improperly using their massive mortgage
10 payment – a mortgage on which they never actually had paid
11 anything and never intended to pay anything – to shelter large
12 amounts of income from their unsecured creditors.
13 In addition to his Complaint, Tye filed a motion pursuant to
14 § 707(b)(2) and (3) asking the court to dismiss the Seiferts’
15 entire bankruptcy case (“Case Dismissal Motion”). Tye based his
16 Case Dismissal Motion on essentially the same alleged facts as he
17 based his § 727 Claim.3
18
2
19 Tye did not expressly state in his Complaint which
paragraphs of § 523(a) he was relying upon to support his
20 nondischargeability claims for relief, but the text of his
Complaint makes reasonably clear that the grounds for his
21 nondischargeability claims were “fraud” (covered by § 523(a)(2))
22 and “willful and malicious” injury (covered by § 523(a)(6)).
3
23 More specifically, Tye alleged in the motion to dismiss:
24 The Seifert bankruptcy is based on two overwhelming
factors: (1) a massive gross income of $29,999.65, and
25 (2) a massive mortgage of $13,393.00 per month that,
26 having never been paid in the 39 months since the
Seiferts obtained the mortgage, is now more than
27 $522,327.00 in arrears. Debtors used this mortgage, in
addition to the 1/60 arrears payment, which comes to
28 (continued...)
3
1 The Seiferts filed a Civil Rule 12(b)(6) motion to dismiss
2 Tye’s adversary proceeding (“Adversary Dismissal Motion”) and
3 filed an opposition to Tye’s Case Dismissal Motion. The
4 Adversary Dismissal Motion was set to be heard on October 7,
5 2010. The Case Dismissal Motion initially was set to be heard on
6 September 15, 2010, but the court continued that hearing to
7 October 21, 2010, to give Tye an opportunity to support his
8 motion with admissible evidence and to give the Trustee and the
9 United States Trustee an opportunity to take a position on the
10 Case Dismissal Motion.4
11
3
12 (...continued)
8,705.45, to pad their debt burden by a total of
13 $22,098.45, even though they have never paid the
mortgage in over three years, even though they clearly
14 do not intend to pay the mortgage, and even though they
15 could not afford to pay the mortgage even if they
wanted to. Once this mortgage is properly excluded
16 from the calculations, Debtors have a tremendous amount
of expendable income with which to pay their unsecured
17 claims.
18
Case Dismissal Motion (Aug 10, 2010) at 2:4-14.
19 4
The United States Trustee filed a response to Tye’s Case
20 Dismissal Motion on October 14, 2010, in which it essentially
joined in the motion. The United States Trustee concluded that
21 the presumption of abuse under § 707(b)(2) did not apply to the
Seiferts’ chapter 7 bankruptcy filing because the Seiferts
22
mathematically could satisfy § 707(b)(2)’s “means test.”
23 However, the United State Trustee also concluded that the
Seiferts’ financial condition demonstrated their chapter 7 filing
24 was abusive under § 707(b)(3)(B). According to the United States
Trustee, if the Seiferts removed from their budget discretionary,
25 excessive and unnecessary spending, instead of their listed
26 monthly deficit of expenses over income in the amount of
$7,354.00, the Seiferts would have no less than $5,560.00 in
27 available monthly disposable income.
While beyond the scope of this appeal, we further note that
28 (continued...)
4
1 On October 5, 2010, two days before the hearing on the
2 Adversary Dismissal Motion and several days before the hearing on
3 the Case Dismissal Motion, Tye drafted and signed a document
4 entitled “Notice of Settlement of Case & Dismissal of Creditor’s
5 § 727 Claim” (“Settlement Notice”).5 The entire text of the
6 Settlement Notice states:
7 Plaintiff Matthew Tye and Debtors / Defendants
Michael & Robin Seifert hereby notify the Court that
8 they have settled their dispute and wish to take all
motions and hearings off calendar. The parties will
9 settle the § 523 portion of the complaint and submit a
dismissal for that portion once the settlement
10 performance is complete.
11 Pursuant to FRBP 7041 and FRCP 41(a)(1)(A)(I),
Creditor Matthew Tye seeks to dismiss the 11 U.S.C.
12 § 727 claims in this Adversary proceeding, as to all
parties.
13
14 Settlement Notice (Oct. 5, 2010) at p.1.
15 Based on the Settlement Notice, the court issued, on
16 October 6, 2010, a tentative ruling waiving the parties
17 appearances at the October 7, 2010 hearing. As the court put it,
18
19
4
(...continued)
20 the Seiferts purported to address the United States Trustee’s
concerns by agreeing to convert their case to chapter 11;
21 however, the Seiferts immediately defaulted on their chapter 11
22 duties and were able to persuade the court to reconvert their
case back to chapter 7. After reconversion of their case back to
23 chapter 7, the Seiferts ultimately stipulated with the United
States Trustee to the dismissal of their bankruptcy case. The
24 bankruptcy court entered the agreed-upon dismissal order on
February 27, 2012, just three days after oral argument in this
25 appeal.
26 5
The Seiferts’ counsel also signed the Settlement Notice.
27 The Seiferts’ counsel then filed the document with the court and,
according to the attached proof of service, served it on both
28 the Trustee and the United States Trustee.
5
1 the Settlement Notice “indicated that [the parties] have arrived
2 at a settlement of the Sec. 523 portion of the complaint and
3 Plaintiff seeks to dismiss the Sec. 727 portion of the complaint
4 . . . .” In addition, the October 6, 2010 tentative ruling
5 directed the Seiferts’ counsel to prepare an order dismissing the
6 § 727 Claim and continuing the hearing on the § 523 Claim.
7 The next day, the Seiferts lodged a proposed order with the
8 court based on the court’s direction in the October 6, 2010
9 tentative ruling. The proposed order, entitled “[Proposed] Order
10 Dismissing § 727 Causes of Action; Approving Settlement of § 523
11 Causes of Action & Withdrawing § 707 Motion,” provided as
12 follows:
13 1. In satisfaction of the §523 causes of action in the
Adversary Complaint, the Debtors agree to pay the
14 Creditor $15,000.00 in fifteen (15) monthly installment
payments of $1,000.00 each, commencing November 1, 2010
15 and ending January 1, 2012 (hereinafter, the
“Settlement Amount”);
16
2. The Debtors shall stipulate to a $30,000.00 Judgment
17 to the Creditor on the § 523 causes of action in the
Adversary Complaint, which the Plaintiff will hold and
18 not file with the Court, unless the Debtors default on
the Settlement Amount, and fail to cure the default
19 after 5 days written notice to Debtors’ counsel, Baruch
Cohen at bcc4929@gmail.com);
20
3. The §727 causes of action in the Adversary
21 Complaint are hereby dismissed;
22 4. The Creditor’s § 707 Motion is hereby withdrawn and
the October 21, 2010 hearing date is hereby vacated;
23
5. The Creditor’s State Court Complaint is hereby
24 dismissed; and
25 6. The court retains jurisdiction over the parties to
enforce this settlement until performance in full of
26 the terms of the settlement.
27 Proposed Order (Oct. 7, 2010) at pp. 2-3. Making only minor,
28 non-substantive modifications, the bankruptcy court entered the
6
1 order as proposed on November 2, 2010 (“Settlement Order”).6
2 On November 15, 2010, Tye filed a motion to vacate the
3 Settlement Order. Tye claimed that the Settlement Notice
4 reflected only a tentative (as opposed to final) settlement
5 reached by the parties. According to Tye, the day after he filed
6 the Settlement Notice, he and Cohen reached an impasse as to
7 whether the settlement provided for immediate dismissals of all
8 of Tye’s claims and motions. Tye further claimed that, despite
9 the settlement impasse, Cohen lodged the proposed Settlement
10 Order without serving or otherwise notifying Tye. Tye argued
11 that, in order to be enforceable, his settlement with the
12 Seiferts needed to be reduced to a writing signed by both parties
13 (or agreed to in open court). Tye cited no legal authority to
14 support this argument; rather, his argument was fact-based. He
15 claimed, as a factual matter, that the parties intended that the
16 settlement only would be binding once it was reduced to a final
17 writing signed by both parties.7
18 Tye further asserted that Cohen had defrauded the court by
19
20 6
The proofs of service attached to the Settlement Order
indicate that the Trustee was served both when the Settlement
21 Order was lodged and when the court entered it. Apparently, the
22 Settlement Order was not served at all on the United States
Trustee, but the United States Trustee (as noted above) was
23 served with the Settlement Notice.
7
24 “Whether the parties intended only to be bound upon the
execution of a written, signed agreement is a factual issue.”
25 Callie v. Near, 829 F.2d 888, 890-91 (9th Cir. 1987); see also
26 Andreyev v. First Nat. Bank of Omaha (In re Andreyev), 313 B.R.
302, 304-05 (9th Cir. BAP 2004) (holding that bankruptcy court
27 erred in approving unwritten settlement because the party seeking
to enforce the settlement submitted no evidence showing that the
28 debtor had actually agreed to the settlement).
7
1 lodging the proposed Settlement Order without serving Tye. Even
2 though a proof of service showing email service on Tye was
3 attached to the proposed Settlement Order, Tye claimed: (1) he
4 never received his service copy of the proposed order, and
5 (2) Cohen did not actually serve him.8
6 Tye further claimed that Cohen defrauded the court by
7 supposedly modifying the settlement terms. According to Tye,
8 under the parties’ tentative settlement, the parties were to
9 defer dismissal of his § 523 Claims until the Seiferts had made
10 all required settlement payments. In contrast, Tye asserted that
11 the Settlement Order as drafted by Cohen provided for immediate
12 dismissal of his entire adversary proceeding, including the § 523
13 Claims.9
14 On November 18, 2010, Cohen filed a declaration in
15 opposition to Tye’s motion to vacate. In relevant part, Cohen
16 stated that he lodged the proposed Settlement Order because the
17 court had directed him to, and before his settlement-related
18 discussions with Tye completely fell apart. Cohen further
19 maintained that Tye drafted and sent him a written settlement
20 agreement, which Cohen and his clients signed and returned to
21
8
22 The only evidence that Tye offered in support of his claim
that he was not served was his own declaration stating that Cohen
23 never served him with anything except for an opposition to Tye’s
Case Dismissal Motion. According to Tye, all of Cohen’s proofs
24 of service amounted to perjury (except for the one attached to
the opposition to the Case Dismissal Motion).
25
9
26 As it turned out, Tye later admitted in open court that he
had misinterpreted the Settlement Order, that nothing in the
27 Settlement Order actually provided either for the dismissal of
the entire adversary proceeding or specifically for the dismissal
28 of the § 523 Claims. See Hr’g Tr. (Dec. 9, 2010) at 11:12-13:7.
8
1 Tye. Even though Tye never signed the written settlement
2 agreement, Cohen asserted that it was binding on Tye because the
3 written, unsigned settlement agreement constituted Tye’s
4 settlement offer, which the Seiferts accepted by signing and
5 returning before Tye attempted to withdraw the offer.
6 Cohen attached to his declaration a long string of emails
7 between himself and Tye regarding their settlement discussions.
8 The colloquy took place between October 7 and October 12, 2010,
9 and as a factual matter demonstrates some doubt as to whether the
10 parties manifested their mutual assent to settle and, if so, what
11 constituted the material terms of their settlement. There were
12 several bones of contention discussed (collectively, “Settlement
13 Issues”): (1) whether the settlement should provide for immediate
14 dismissal of all claims in the Complaint as well as the Case
15 Dismissal Motion; (2) whether at some point Tye agreed to let the
16 bankruptcy court decide for the parties whether the adversary
17 proceeding should be immediately dismissed rather than held in
18 abeyance pending completion of the settlement payments;
19 (3) whether the Seiferts accepted Tye’s settlement offer by
20 signing and returning the written settlement agreement;
21 (4) whether the Seiferts rejected Tye’s settlement offer by
22 making a counteroffer before they signed and returned the written
23 settlement agreement; (5) whether Tye orally withdrew his
24 settlement offer before the Seiferts signed and returned the
25 written settlement agreement; and (6) whether the written
26 settlement agreement was enforceable even though Tye never signed
27 it.
28 Notwithstanding the above, the other basic terms of
9
1 settlement never were in dispute. The undisputed settlement
2 terms included, among other things, satisfaction of Tye’s fee
3 claim by the Seiferts timely making 15 monthly payments of
4 $1,000.00 each, and Tye’s entitlement to a stipulated
5 nondischargeable judgment in the amount of $30,000.00 if the
6 Seiferts defaulted on the settlement payments.
7 At a hearing held on December 9, 2010, the court denied
8 Tye’s motion to vacate. Tye attempted to argue that the parties
9 never reached a binding, enforceable settlement agreement.
10 However, the court rejected that argument. In pertinent part,
11 the court stated: “I think you have an enforceable settlement
12 when you submitted to me the [Settlement Notice].” Hr’g Tr.
13 (Dec. 9, 2010) at 9:8-11. Tye attempted to characterize the
14 Settlement Notice as merely notifying the court of a tentative
15 settlement between the parties, focusing on a single phrase in
16 the Settlement Notice, which used the future tense: “the parties
17 will settle the 523 claim.” Id. at 9:14-15. But the court
18 rejected Tye’s attempted characterization, essentially reasoning
19 that Tye’s characterization of that single phrase was
20 inconsistent with the Settlement Notice as whole, which
21 represented to the court that a settlement had been reached. Id.
22 at 9:19-25; see also id. at 2:10-3:15.
23 The bankruptcy court entered its order denying Tye’s motion
24 to vacate on September 7, 2011, and Tye timely appealed on
25 September 21, 2011.
26 JURISDICTION
27 The bankruptcy court had jurisdiction under 28 U.S.C.
28 § 157(b)(2)(I), (J) and (O), and we have jurisdiction under
10
1 28 U.S.C. § 158.102 ISSUE
3 Did the bankruptcy court abuse its discretion when it denied
4 Tye’s motion to vacate the Settlement Order?
5 STANDARDS OF REVIEW
6 “We review the bankruptcy court's decision on a motion to
7 vacate its judgment or order for an abuse of discretion.” United
8 Student Funds, Inc. v. Wylie (In re Wylie), 349 B.R. 204, 208
9 (9th Cir. BAP 2006) (citing Hammer v. Drago (In re Hammer),
10 112 B.R. 341, 345 (9th Cir. BAP 1990), aff'd, 940 F.2d 524 (9th
11 Cir. 1991)).
12 Under the abuse of discretion standard of review, we first
13 "determine de novo whether the [bankruptcy] court identified the
14 correct legal rule to apply to the relief requested." United
15 States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.2009) (en banc).
16 And if the bankruptcy court identified the correct legal rule, we
17 then determine under the clearly erroneous standard whether its
18 factual findings and its application of the facts to the relevant
19 law were: "(1) illogical, (2) implausible, or (3) without support
20 in inferences that may be drawn from the facts in the record."
21 Id. (internal quotation marks omitted).
22
23
24
25 10
While the Settlement Order did not immediately and fully
26 dispose of Tye’s adversary proceeding, orders approving
settlements are themselves typically considered final orders over
27 which we have jurisdiction. See, e.g., Goodwin v. Mickey
Thompson Entm't Group, Inc. (In re Mickey Thompson Entm't Group,
28 Inc.), 292 B.R. 415, 419-20 (9th Cir. BAP 2003).
11
1 DISCUSSION
2 A. The bankruptcy court abused its discretion when it denied
3 Tye's motion to vacate the Settlement Order.
4 As a court of equity, a bankruptcy court may summarily
5 enforce a settlement agreement resolving a dispute that was
6 pending before that court. See Rains v. Finn (In re Rains),
7 428 F.3d 893, 907 (9th Cir. 2005)(citing City Equities Anaheim,
8 Ltd. v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim,
9 Ltd.), 22 F.3d 954, 958 (9th Cir. 1994)). But before the court
10 may enforce the settlement, there must be a proper determination
11 that the parties entered into a binding settlement agreement.
12 Callie, 829 F.2d at 890. When the existence and/or the terms of
13 the settlement are in dispute, “the parties must be allowed an
14 evidentiary hearing.” Id.; see also In re Andreyev,
15 313 B.R. at 305 (holding that party seeking to enforce the
16 settlement has the burden of proof to establish that the
17 agreement existed).
18 Andreyev is particularly instructive. There, the creditor
19 filed a nondischargeability complaint against the debtor, and
20 trial was continued several times based on the parties’
21 settlement discussions. The creditor filed a motion for approval
22 of the settlement, in which the creditor represented that the
23 parties had agreed to settle based on debtor’s promise to pay
24 $1,000 but that debtor had failed to sign a proposed stipulated
25 judgment and had failed to respond to the creditor’s inquiries.
26 Debtor did not respond to the settlement motion and did not
27 appear at the settlement motion hearing; however, after the court
28 granted the motion and entered the “stipulated” judgment, the
12
1 debtor filed a motion for reconsideration, saying that she missed
2 the hearing because of a medical condition and that she wanted to
3 litigate the nondischargeability action. Id. at 304. At the
4 hearing on the reconsideration motion, the debtor told the court
5 that she never agreed to the settlement. The court nonetheless
6 denied the reconsideration motion.
7 On appeal to this panel, we reversed and remanded, holding
8 that the bankruptcy court had abused its discretion in enforcing
9 the settlement. Id. at 304-05. The creditor argued that the
10 debtor had waived any objection to the settlement motion by not
11 filing a written opposition and by not appearing at the
12 settlement hearing, but we rejected that argument. Id. at 305.
13 As we explained there, “[t]he court has no discretion to enforce
14 a settlement where there are facts in dispute; the court must
15 hold [an evidentiary] hearing.” Id. at 304 (citing In re City
16 Equities Anaheim, Ltd., 22 F.3d at 958).
17 Here, Tye’s motion to vacate and the Seiferts’ opposition
18 thereto demonstrated that a dispute existed between the parties
19 regarding the existence and terms of their settlement agreement.
20 The parties disagreed whether the written settlement agreement
21 was binding given that it only was signed by the Seiferts and
22 their counsel, and disagreed whether the parties intended to be
23 bound by their other settlement communications in the absence of
24 a fully-executed formal written settlement agreement. They also
25 disagreed whether dismissal of Tye’s lawsuits (both in state
26 court and federal court) should be immediate or deferred pending
27 the completion of the settlement payments.
28 Here, the bankruptcy court did not hold an evidentiary
13
1 hearing. Moreover, it is clear from a fair reading of the entire
2 December 9, 2010 hearing transcript that the court only
3 considered the Settlement Notice and the Settlement Order in
4 determining that the parties had entered into a binding
5 settlement agreement.11
6 Consequently, the court erred in determining, without an
7 evidentiary hearing, that the parties had entered into a final
8 and binding settlement agreement, and in denying Tye’s motion to
9
10 11
When the bankruptcy court decided that a settlement had
been reached based exclusively on the Settlement Notice and
11
Settlement Order, and refused to consider any of the parties’
12 evidence submitted regarding the existence and the terms of that
settlement, the bankruptcy court’s decision arguably could be
13 construed as the application of judicial estoppel against Tye.
More specifically, because Tye represented to the court in the
14 Settlement Notice that a settlement had been reached, and because
15 the court relied on the Settlement Notice in entering the
Settlement Order, it seems as if the bankruptcy court sub
16 silentio concluded that Tye should be judicially estopped from
asserting that there was no settlement.
17 But this panel has held that judicial estoppel should not be
applied when the remedy to be imposed could adversely impact the
18 rights of innocent third parties. See Cheng v. K & S Diversified
19 Invs., Inc. (In re Cheng), 308 B.R. 448, 454 (9th Cir. BAP 2004).
Here, the so-called settlement purported not only to resolve
20 Tye’s § 523 Claims but also to dismiss the § 727 Claim, which
implicated the rights of all of the Seiferts’ creditors and not
21 just Tye’s rights. See Rule 7041 and accompanying Advisory
Committee Notes (giving bankruptcy court discretion, before
22
approving the dismissal of a § 727 action, to impose terms and
23 conditions on that dismissal in order to ensure that debtor would
not “buy” his discharge from the plaintiff to the detriment of
24 his entire bankruptcy estate); Bank One v. Kallstrom (In re
Kallstrom), 298 B.R. 753, 759 (10th Cir. BAP 2003) (noting that
25 Rule 7041 enables bankruptcy courts to prevent the “trafficking
26 of discharges”). In short, to the extent the bankruptcy court
sub silentio applied judicial estoppel to conclude that a
27 settlement had been reached, such application was improper in
light of the potential impact of the settlement on the Seiferts’
28 bankruptcy estate as a whole.
14
1 vacate on that basis.12
2 B. Other considerations.
3 1. Mootness and Other Jurisdictional Issues
4 Citing Clear Channel Outdoor, Inc. v. Knupfer (In re PW,
5 LLC), 391 B.R. 25, 33 (9th Cir. BAP 2008), the Seiferts argued in
6 their appeal brief that this appeal is equitably moot. According
7 to the Seiferts, they have paid the full $15,000.00 in settlement
8 payments in reliance on the settlement, and it is not practicable
9 to unwind the settlement. But the burden of proof is on the
10 party claiming mootness to establish that circumstances have
11 occurred which have rendered the matter equitably moot. See
12 Palmdale Hills Prop., LLC v. Lehman Commercial Paper, Inc. (In re
13 Palmdale Hills Prop., LLC), 654 F.3d 868, 874 (9th Cir. 2011).
14 The Seiferts have not met this burden, because they have not
15 established that the bankruptcy court on remand could not order
16 Tye, if it determines it to be necessary and appropriate, to
17 disgorge the $15,000.00 in fees paid. See Focus Media, Inc. v.
18 Nat'l Broad. Co., Inc. (In re Focus Media, Inc.), 378 F.3d 916,
19 923-24 (9th Cir. 2004) (stating that appeal is not equitably moot
20
21 12
We note that Tye did not challenge the settlement as an
improper dismissal of a § 727 action under Rule 7041. See
22
generally In re Kallstrom, 298 B.R. at 760 (upholding bankruptcy
23 court’s refusal to approve settlement and dismissal of § 727
action in quid pro quo exchange for payments to plaintiff). We
24 also note that neither the Trustee nor the United States Trustee
objected to the settlement or participated in this appeal even
25 though both had at least some notice of both matters. Because no
26 one raised the argument, it has been waived for purposes of this
appeal. See Barnes v. Belice (In re Belice), 461 B.R. 564, 569
27 n.4 (9th Cir. BAP 2011). But this does not mean that, on remand,
the bankruptcy court is necessarily precluded from considering
28 the issue.
15
1 when court can return parties to status quo by ordering one party
2 to disgorge funds).
3 The Seiferts further contended at oral argument that, by
4 operation of Cal. Civil Code § 1473,13 this appeal has been
5 rendered moot because the “full performance” of their obligations
6 to Tye extinguished their obligations and those obligations
7 cannot be reinstated. But in making this argument, the Seiferts
8 are groundlessly assuming that the Settlement Order will not be
9 vacated on remand. Absent the settlement, the Seiferts would
10 need to show that Tye somehow waived any additional performance
11 beyond the Seiferts’ payment of the $15,000.00. See Sosin v.
12 Richardson 26 Cal.Rptr. 610, 613 (Cal. App. 1963) (stating that
13 party invoking Cal Civil Code § 1439 must allege and prove full
14 performance or waiver of full performance).
15 After oral argument, during a routine review of the
16 bankruptcy case docket, we discovered for the first time that the
17 underlying bankruptcy case had been dismissed as of February 27,
18 2012, based on a stipulation between the Seiferts and the United
19 States Trustee.
20 We note that the dismissal of the underlying bankruptcy case
21 does not render this appeal moot, because there still is a live
22 controversy between the parties regarding whether the settlement
23
13
24 Cal. Civil Code § 1473 provides:
25 Obligation extinguished by performance. Full
26 performance of an obligation, by the party whose duty
it is to perform it, or by any other person on his
27 behalf, and with his assent, if accepted by the
creditor, extinguishes it.
28
16
1 is binding. We further note that, notwithstanding the case
2 dismissal, the bankruptcy court retains jurisdiction to interpret
3 the Settlement Order and to determine whether it should be
4 enforced. See Aheong v. Mellon Mortg. Co. (In re Aheong),
5 276 B.R. 233, 242 (9th Cir. BAP 2002); Pavelich v. McCormick,
6 Barstow, Sheppard, Wayte & Carruth LLP (In re Pavelich), 229 B.R.
7 777, 780-81 (9th Cir. BAP 1999).
8 Finally, we note that nothing in § 349 requires a different
9 conclusion regarding the effect of the case dismissal on either
10 our jurisdiction or the bankruptcy court’s jurisdiction. A
11 number of courts have held that § 349 does not necessarily
12 invalidate or render moot bankruptcy court rulings not explicitly
13 referenced in the statute. See, e.g., In re Pavelich, 229 B.R.
14 at 780 (holding that § 349 did not invalidate discharge order);
15 Tri-River Chem. Co., Inc. v. TNT Farms (In re TNT Farms), 226
16 B.R. 436, 441-42 (Bankr. D. Idaho 1998) (holding that § 349 did
17 not invalidate lien granted in § 363 cash collateral order, and
18 citing Wytch v. Pac. Reconveyance (In re Wytch), 223 B.R. 19019 (9th Cir. BAP 1998), rev'd on other grounds, 213 F.3d 645 (9th
20 Cir. mem. dec. March 24, 2000)).
21 2. Statute of Frauds
22 Both parties devoted a significant portion of their briefs
23 on appeal to the issue of whether the settlement was
24 unenforceable by virtue of California’s statute of frauds, Cal.
25 Civil Code § 1624(a)(1).14
26
14
27 Cal Civil Code § 1624(a)(1) provides:
28 (continued...)
17
1 However, the statute of frauds can be waived, and was waived
2 here, because Tye did not raise the statute in the bankruptcy
3 court. See 1 B.E. Witkin, SUMMARY OF CAL. LAW, Contracts (10th ed.
4 2005) § 344 (citing California cases holding that statute must be
5 raised or it is waived); see also Barnes v. Belice (In re
6 Belice), 461 B.R. 564, 569 n.4 (9th Cir. BAP 2011) (holding that
7 arguments not raised in the bankruptcy court can be deemed waived
8 for appeal purposes).
9 3. Declarations and Exhibits Attached to the Parties’
10 Appeal Briefs; Belated Excerpts of Record
11 Both parties attached to their briefs new declarations in
12 which they attempted to introduce new evidence that was not
13 presented to the bankruptcy court at or before the time the court
14 entered the order appealed. Generally speaking, we cannot
15 consider these new materials. See Oyama v. Sheehan (In re
16 Sheehan), 253 F.3d 507, 512 n. 5 (9th Cir. 2001) ("[E]vidence
17 that was not before the lower court will not generally be
18 considered on appeal."); Kirschner v. Uniden Corp. of Am.,
19 842 F.2d 1074, 1077–78 (9th Cir. 1988) (papers not filed or
20 admitted into evidence by the trial court prior to judgment on
21 appeal were not part of the record on appeal and thus stricken).
22 Except to the extent the declarations and the new exhibits
23
14
24 (...continued)
(a) The following contracts are invalid, unless they,
25 or some note or memorandum thereof, are in writing and
26 subscribed by the party to be charged or by the party's
agent:
27
(1) An agreement that by its terms is not to be
28 performed within a year from the making thereof.
18
1 are relevant to the mootness discussion above, we hereby deem
2 them stricken.
3 In addition, on February 17, 2012, just days before oral
4 argument before this panel, the Seiferts belatedly filed excerpts
5 of record. With the exception of one document, item number 21 in
6 the excerpts (a declaration of Robin Seifert), all of the
7 documents are properly part of the record on appeal.
8 Furthermore, because we previously lacked an appropriate excerpts
9 of record, we exercised our discretion to review the bankruptcy
10 court’s case docket and adversary proceeding docket as part of
11 our review of this appeal. See In re Belice, 461 B.R. at 569
12 n.2. As a result of our independent review, we had already
13 looked at all of the items properly included in the belated
14 excerpts of record. Consequently, Tye has not been prejudiced by
15 the belated filing of the excerpts of record, so we need not take
16 any action with respect thereto.
17 CONCLUSION
18 For all of the reasons set forth above, we VACATE the
19 court’s denial of Tye’s motion to vacate, and we REMAND with
20 instructions for the bankruptcy court to hold an evidentiary
21 hearing on the existence and terms of the parties’ settlement.
22 If the bankruptcy court, after the evidentiary hearing,
23 determines that the parties did not enter into a binding
24 settlement, then the bankruptcy court should vacate the
25 Settlement Order.
26
27
28
19